CMS Issues Proposed Hospital Outpatient Payment Regulation No Direct by lof94292


									  CMS Issues Proposed Hospital Outpatient Payment Regulation: No
   Direct Impact on ASCs, but Worthy of ASC Attention in Future

Reprinted with permission from the American Association of Ambulatory Surgery Centers (AAASC). Please
contact AAASC at (423) 915-1001 for additional information.

On July 25, the Centers for Medicare and Medicaid Services published a proposed regulation
implementing changes to the hospital outpatient prospective payment system effective January 1,
2006. This rule does not have any current impact on ASC payment rates, as its application is
limited to hospital outpatient departments (HOPD). AAASC and the ambulatory surgery center
community are seeking enactment of legislation which would, commencing January 2008, link
ASC payments to the rates paid to HOPDs; therefore, in the relatively near future, adjustments to
hospital rates will directly affect payments to ASCs. The proposed rule may be reviewed at: ps/2006p/1501p.asp. Comments to the proposal may be
submitted until September 16, 2005.

There are several highlights that may be of interest to AAASC members contemplating life in the
future under the HOPD payment system:

Aggregate Payments to HOPDs
Hospital outpatient departments will receive $27.5 billion in 2006, compared with $26.1 billion
in 2005, an increase of 5.4 percent. HOPDs will receive a 3.2 percent annual update (adjusted for
a number of factors, some of which are discussed below).

Future Impact on ASCs: Under current law, ASCs will receive no annual update (because of the
five-year COLA freeze imposed by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA). Under our proposed legislation, ASCs would receive the
same cost of living adjustment as HOPDs.

Beneficiary Coinsurance
The proposal would reduce the maximum coinsurance to 40 percent, down from 45 percent;
average HOPD copayments are estimated to be 30 percent in 2006. Copayments for hospital
outpatients are gradually reduced over the next decade until they reach 20 percent of the
Medicare payment.

Future Impact on ASCs: Please note that ASC copayments are currently fixed at 20 percent of
the Medicare facility fee; the legislation we are seeking would not change the current ASC
beneficiary copayment liability.

Recalibration of APC Weights
Procedures performed in HOPDs are paid based upon their groupings into ambulatory patient
classifications (APC); there are approximately 100 surgical APCs, compared with the nine
groupings applicable to procedures performed in the ASC. The relative weights (and, hence,
payment rates) assigned to APCs are recalibrated annually to account for changes in hospital
costs/charges as reflected in claims data. The average APC would increase by 5.7 percent in
2006 under the proposed regulation, although it is important to note that recalibrations among
APCs vary significantly.
Future Impact on ASCs: It is important to understand that HOPD rates, in addition to
adjustments for inflation, are recalibrated on an annual basis to account for changes in
technology, increases in overhead, etc. ASC base payment rates haven’t been recalibrated (or
rebased) in l5 years. Under the legislation AAASC will seek, ASC rates would be recalibrated
annually just as are HOPD rates.

Hospitals receive outlier payments for a small number of very high-cost cases; the monies
available in 2006 for outliers would be reduced from 2.0 to 1.0 percent of total payments under
the HOPD system.

Future Impact on ASCs: Under the legislation we are seeking, ASCs would not be eligible for
outlier payments.

Payment for Drugs and Devices
Through a very complex formula, HOPDs are eligible for additional payments above base
payment rates to encompass the costs of certain drugs administered and medical devices
implanted during hospital outpatient cases. While payments for drugs and biologicals will
increase slightly in 2006, fewer medical devices will be eligible for payment on a “pass-
through” basis next year than in 2005.

Future Impact on ASCs: Under our ASC legislation, ASCs would be eligible for reimbursement
for drugs and devices on the same basis as hospital outpatient departments.

Consider this summary of the proposed HOPD rule as the first chapter in the primer on how the
ASC payment system should dovetail with that of hospital outpatient departments commencing
in 2008.

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